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MARKETING STRATEGY

MARKETING STRATEGY IS THE


SOLUTION TO PROVIDE SUPERIOR
CUSTOMER VALUE TO THE
TARGET MARKET
STRATEGY FORMULATION

STARTING POINT-----MARKET ANALYSIS

CONSUMER

COMPANY
COMPETITION
CONDITION
MARKET SEGMENTATION-THE
2ND STEP
THE THREE MAJOR SEGMENTS COULD BE

1. THE GEOGRAPHIC SEGMENT


2. THE DEMOGRAPHIC SEGMENT
3. THE PSYCHOGRAPHIC SEGMENT
4. BEHAVIORAL SEGMENT
Cont..
MARKET ANALYSIS

COMPETITION:
-Michael Porter’s Five Forces Analysis
-Value Chain Analysis
-SWOT Analysis
Michael Porter’s Five Forces Model
THREAT OF NEW ENTRANT DEPENDS UPON:
-economies of scale
-Capital /investment requirement
-Customer switching costs
-Access to distribution channel
-Access to technology
-Brand loyalty
-Degree of retaliation from existing players
-Government policies
THREAT OF SUBSTITUTES DEPENDS
UPON:
-quality of the substitute
-Buyer’s willingness to substitute
-Relative price and performance of
substitutes
-Switching costs to substitutes
BARGAINING POWERS OF SUPPLIERS
DEPENDS UPON:
-concentration of suppliers Vs the buyers
-branding of the supplier
-suppliers threat to integrate forward
-quality n service
-switching cost of the suppliers
BARGAINING POWER OF BUYERS DEPENDS
UPON:
-concentration of buyers VS the suppliers
-products represents a significant amount of
buyer’s costs or purchases
-differentiated/undifferentiated product
-switching costs to the buyers
-buyers threat of backward integration
-information update of the buyers
INTENSITY OF RIVALRY DEPENDS
UPON:
-structure of competition;numerous
competitors vs clear cut market leader
-degree of product differentiation
-structure of industry costs;high fixed costs
leading to price cutting
-exit barriers; high leads to intense rivalry
VALUE CHAIN –MICHAEL
PORTER
IDENTIFIES 9 WAYS TO CREATE MORE
CUSTOMER VALUES THROUGH PRIMARY
AND SECONDARY ACTIVITIES
PRIMARY ACTIVITIES:
1. INBOUND LOGISTICS
2. OPERATIONS
3. OUTBOUND LOGISTICS
4. MARKETING AND SALES
5. SERVICE
Cont….
SECONDARY ACTIVITIES:
6.FIRM INFRASTRUCTURE
7.HUMAN RESOURCE MANAGEMENT
8.TECHNOLOGICAL DEVELOPMENT
9.PROCUREMENT
Framework for competitor analysis
Future goals current strategy

competitor’s response profile

Assumptions capabilities
FUTURE GOALS:
Business Unit Goals
-financial goals
-values and beliefs
-organisational structure
-control and incentive system
Parent Company
-current sales of the parent company
-overall goals
-strategic relevance of the business unit to the
parent company
-diversification plans
PORTFOLIO ANALYSIS
-BCG
-GE
ASSUMPTIONS
• Competitor’s assumptions about itself
• Competitor’s assumptions about the
industry
CURRENT STRATEGY-competitor’s key
operating policies in each functional area
of the business
CAPABILITIES
-assessment of competitor’s strengths and
weakness in varied areas
-core capabilities of the competitor’s in each
of the functional areas
-Ability to grow
-quick response capability
-Staying power
COMPETITOR’S RESPONSE PROFILE
-is the competitor satisfied with its current
position?
-what likely moves or strategy shifts will the
competitor make?
-where is the competitor vulnerable?
-what will provoke the greatest and most
effective retaliation by the competitor?
CONDITION
MACRO ENVIRONMENT

 DEMOGRAPHIC ENVIRONMENT
 SOCIO-CULTURAL ENVIRONMENT
 ECONOMIC ENVIRONMENT
 POLITICAL ENVIRONMENT
 NATURAL ENVIRONMENT
 TECHNOLOGICAL ENVIRONMENT
 LEGAL ENVIRONMENT
COMPANY
Internal Appraisal
-BCG
-GE McKinsey
-SWOT
Strategies in terms of 4 Ps:
-Product
-Price
-Place
-Promotion
PRODUCT
AN OFFERING THAT SATISFIES THE
NEEDS OF THE CUSTOMER
Major tasks in Product
Management
I. MANAGING THE PLC :--

STAGES:-
INTRODUCTION
GROWTH
MATURITY
DECLINE
NEW PRODUCT DECISIONS

SIGNIFICANCE OF NEW PRODUCT:


• MEETING CHANGES IN CONSUMER
DEMAND
• MAKING NEW PROFITS
• COMBATING ENVIRONMENTAL THREATS
NEW PRODUCTS CAN BE:
• NEW ARISING OUT OF TECHNOLOGICAL
INNOVATION
• NEW DUE TO MARKET-ORIENTED
MODIFICATIONS
STAGES IN NEW PRODUCT
DEVELOPMENT

• IDEA GENERATION
• IDEA SCREENING
• CONCEPT TESTING
• MARKETING STRATEGY
• BUSINESS/MARKET ANALYSIS
• PRODUCT DEVELOPMENT
• MARKET TESTING
• COMMERCIALISATION
STRATEGIES AT VARIOUS
STAGES
INTRODUCTION:-strategies to be aimed at
• Attracting customers by raising awareness of,
and interest in the product through advertising,
public relations and publicity efforts that stress
key product features and benefits.
• Inducing customers to try and buy the product
through the use of various sales tools and
pricing activities.
• Strengthening and expanding channel and
supply chain relationships to gain sufficient
product distribution to make the accessible to
target market.
• Setting pricing objectives that will balance the
firm’s need to recoup the investment with the
competitive realities of the marketplace

GROWTH –strategies to be aimed at


• Improving product quality,adding new product
features and style
• Entering new market segments
• Increasing distribution coverage
• Shift from product awareness advertising to
product preference advertising
• Finding an ideal balance between price and
demand as the price elasticity becomes more
important as product moves towards the maturity
stage

MATURITY strategies to be aimed at


• Generating cash flow
• Holding market share
• Stealing market share
• Increasing share of customers
DECLINE –options available are
• Postpone the decline
• Accept its decline
II. APPRAISAL OF THE PRODUCT
LINE

• ALTERING THE LENGTH OF THE LINE


THROUGH:
– STRETCHING THE LINE -UP or DOWN
– LINE FILLING
– LINE PRUNNING
III. MANAGING BRAND EQUITY

• BRAND EQUITY- TOTAL WEIGHTAGE THE


CUSTOMER GIVES TO THE BRAND
• BRAND =
BASIC PRODUCT+NAME+LOGO+MARKETING
STRATEGY
STAGES OF BRANDING:
1.BRAND AWARENESS
2.BRAND ACCEPTANCE
3.BRAND PRIORITY
4.BRAND LOYALTY
NAMING THE BRAND
• INDIVIDUAL BRAND NAMES
ex: Breeze, Camay
• FAMILY/UMBRELLA BRAND
ex: Lakme, Ponds
• COMPANY NAME AS BRAND NAME
ex: Godrej, Tata , BPL
• MIDDLEMEN’S/STORE BRAND/PRIVATE
LABEL
ex: Shopper’s Stop, Pantaloons
NEED FOR BRANDING
• MARKET IDENTITY
• LEGAL PROTECTION
• CUSTOMER LOYALTY
• PROFIT MARGINS
• SEGMENTATION
• BARGAINING CAPACITY
• CORPORATE IMAGE
PRICING
MONETARY VALUE IN RETURN OF
PRODUCT/SERVICE

OCCASIONS OF PRICING:-
1. SETTING A PRICE OF A NEW PRODUCT
2. INTRODUCTION OF EXISTING PRODUCT IN
A NEW MARKET
3. RESETTING /ADJUSTING THE CURRENT
PRICE
THE PROCESS…..
• SELECTING THE PRICING OBJECTIVES
• DETERMINING THE DEMAND
• ESTIMATING COST
• ANALYSING COMPETITOR’S
COSTS,PRICES AND OFFERS
• SELECT A PRICING METHOD
• SELECTING THE FINAL PRICE
SELECTING THE PRICING
OBJECTIVES
THE COMPANY FIRST DECIDES WHERE IT
WANTS TO POSITION ITS MARKET
OFFERING. THE CLEARER A FIRM’S
OBJECTIVES, THE EASIER IT IS TO SET
PRICE.

• Survival.
• Maximum current profit.
• Maximum market share.
• Maximum market skimming.
• Product-quality leadership
Demand estimation
Factors contributing to Price sensitivity:
• Unique Value effect
• Substitute Awareness effect
• Difficult Comparison effect
• Total expenditure effect
• End-Benefit effect
• Shared Cost effect
• Sunk Investment Effect
• Price Quality effect
• Inventory effect
Measuring demand curves:
-controlled experimentation
-Direct probing
-Statistical analysis of past data
Demand is likely to be less elastic under the
following conditions:
• There are few or no substitutes or competitors.
• Buyers do not readily notice a higher price.
• Buyers are slow to change their buying habits.
• Buyers think the higher prices are justified.
• Costs set the floor to the price.
• Competitors’ prices and the price of substitutes
provide an orienting point.
• Customers’ assessment of unique features
establish the price ceiling.

• There are five price-setting methods:


• Markup pricing.
• Target-return pricing.
• Perceived-value pricing.
• Value pricing.
• Going-rate pricing.
Other price adaptations
a) Price discrimination
customer segment pricing
Trade discrimination
Location pricing
Time pricing
b) Discounts
Cash discount
Quantity discount
Trade discount
Seasonal discount
c) Promotional pricing
Loss Leader pricing
Special event pricing
Longer payment terms
Low interest financing
Warranties and service contracts

d) Product mix pricing


Product line pricing
Captive product pricing
Two part pricing
Product bundling pricing
DISTRIBUTION NETWORK
• Know what work marketing channels
perform
• Know how channels should be designed
• Know what decisions companies face in
managing their channels
• Know how companies should integrate
channels and manage channel conflict
NEED FOR A DISTRIBUTION
SYSTEM
GENERAL DISCREPANCY EXISTING :
• SPATIAL DISCREPANCY
• TEMPORAL DISCREPANCY
• NEED TO BREAK THE BULK
• NEED TO PROVIDE ASSORTMENT
• INFORMATION GAP
ENTITIES
1)PHYSICAL DISTRIBUTION

2) MARKETING CHANNELS
PHYSICAL DISTRIBUTION
1.TRANSPORTATION
-MODE:air,rail,road,water,pipeline

-ROUTING

-COST
….cont.

2. WAREHOUSING
a. Critical storage points

nos. Location

b. Inventory control-costs

ordering carrying stockout


MARKETING CHANNELS

MOST PRODUCERS DO NOT SELL THEIR GOODS DIRECTLY


TO THE FINAL USERS; BETWEEN THEM STANDS A SET OF
INTERMEDIARIES PERFORMING A VARIETY OF FUNCTIONS

These intermediaries constitute a marketing channel

SET OF INDEPENDENT
ORGANISATIONS INVOLVED IN THE
PROCESS OF MAKING A PRODUCT
OR SERVICE AVAILABLE FOR
USE/CONSUMPTION.
INTERMEDIARIES:

TYPES OF MARKETING
INTERMEDIARIES
• CFAs
• Distributor/wholesaler
• Retailer
exclusive:owned or franchise
shop in shop
• commission agents
FUNCTIONS
a)Information-Potential & current customers
-Competitors
-Forces in the mktg. environment
b)Promotion
c)Negotiation
d)Risk taking(financial,credit
terms,storage,pilferage)
e)Transactional efficiency
financing to the manufacturer
service provider
presale
post sale
LEVELS OF CHANNEL
• ZERO LEVEL
manufactureconsumer
eg: EUREKA forbes
• ONE LEVEL
Presence of one intermediary
Manufactures----retailer agents distributor ---consumer
Eg. Automobiles
• TWO LEVELS
Manufacturewholesaler-retailer-consumer
Eg. FMCG products
• THREE LEVELS
Manufactureagentswholesaler-retailer-consumer
Eg. agricultural products
CHANNEL DESIGN
DECISIONS
1. ESTABLISH CHANNEL OBJECTIVE
-market coverage
-control objectives
-ensuring minimum effort exerted by the
consumer in procuring the product
-quality objective
…cont.

2. DETERMINING THE TYPES OF


CHANNELS TO BE USED.
- Largely depends on the channel objectives of
the firm.

3. IDENTIFY CHANNEL
ALTERNATIVES

i)Intensity of distribution
• Exclusive( one area, one shop )
• Selective ( products available in few shops)
• Intensive ( every retail shop has the product )
ii) Proximity to end users.
iii) Existing distribution practices (by competitive
analysis).

4. EVALUATE THE ALTERNATIVES.


– Economic criteria
cost Vs value
– time period taken by a channel to deliver
– control criteria
– channel availability
5. SELECTING THE FINAL CHANNEL
MEMBER
– they should stick to your terms and
conditions.
– Motivate them
– Train them
– Resolve channel conflicts.
CHANNEL CONFLICTS

TYPES OF CONFLICT AND COMPETITION


• Vertical channel conflict means conflict
between different levels within the same
channel.
• Horizontal channel conflict involves
conflict between members at the same level
within the channel.
• Multi-channel conflict exists when the
manufacturer has established two or more
channels that sell to the same market.
CAUSES
• Goal incompatibility.
• Unclear roles and rights.
• Improper communication.
• Lack of autonomy
CONFLICT MANAGEMENT
METHOD
1. INSTITUTIONAL APPROACHES
JOINT MEMBERSHIP OF ASSOCIATION
EXCHANGE OF EXECUTIVES
COOPTATION

2. THIRD PARTY MECHANISM


MEDIATION
ARBITRATION
Integration of channels
VMS
HMS
MULTI-CHANNEL MARKETING
COMMUNICATION MIX

PRODUCT-
FEATURES,SIZE,SHAPE,FINISH,PACKAGING,L
ABE-LLING,BRAND NAME,COMPANY NAME.
PRICE- QUALITY EQUATION
PRICE-STATUS EQUATION
PLACE- STORE IMAGE,STORE- LEVEL
MERCHANDISING
PROMOTION:-
• PERSONAL SELLING
• PUBILC RELATIONS
• ADVERTISING
• SALES PROMOTION
PERSONAL SELLING- PAID PERSONAL
COMMUNICATIONTHAT ATTEMPTS TO INFORM
CUSTOMERS ABOUT PRODUCTS AND
PERSUADE THEM TO PURCHASE THOSE
PRODUCTS.
FACE TO FACE TRANSACTION BETWEEN A
SALESMAN AND A PROSPECTIVE CUSTOMER
FACTORS SUPPORTING PROMOTION
• KNOWLEDGE& EXPERTISE
• BETTER OUTLOOK & PERSONALITY
• EFFECTIVE COMMUNICATION SKILLS
• A CONVINCING MESSAGE
PUBLIC RELATIONS- TRACKS PUBLIC ATTITUDES,
IDENTIFIES ISSUES THAT MAY ELICIT PUBLIC
CONCERN, AND DEVELOPS PROGRAMMES TO
CREATE AND MAINTAIN POSITIVE RELATIONSHIP
BETWEEN A FIRM AND ITS STAKEHOLDERS.
CAN WIN IN YOUR FAVOUR THROUGH
• SPONSORSHIP
• NEWS(PRESS RELEASE)
• FEATURE ARTICLE
• PRESS CONFERENCE
• EVENT MANAGEMENT
• SOCIAL CAUSE
ADVERTISING—TELLING &
SELLING
ANY PAID FORM OF NON-PEROSNAL
COMMUNICATION OR PROMOTION BY
AN IDENTIFIED SPONSOR.

5 Ms OF ADVERTISING
MISSION –ADVERTISING OBJECTIVES

AREAS WHERE OBJECTIVES CAN BE SET:


• INTRODUCTION OF NEW PRODUCTS
• MARKET EXPANSION
• REMINDING TO CUSTOMERS
• BUILDING UP CORPORATE & BRAND
IMAGE
• AIDING THE TOTAL SELLING FUNCTION
• STIMULATING IMPULSE BUYING
MONEY—ADVERTISING BUDGET

DIFFERENT METHODS:
• COMPETITIVE PARITY METHOD
• AFFORDABILITY
• PERCENTAGE OF SALES/TURNOVER
• OBJECTIVE- TASK METHOD
• PAST SALES –ADVERTISING
EXPENDITURE
MESSAGE

SHOULD BE
• SIMPLE
• CREATE A BANDWAGON EFFECT
MEDIA

REACH FREQUENCY EXPOSURE


TYPES:-
PRINT
• NEWSPAPER
• MAGAZINES
• TRADE JOURNALS
• DIRECT MAILS
AUDIO/VISUAL/ELECTRONIC
• RADIO
• TV
• INTERNET
• CINEMA
• CASSETTES –AUDIO/VISUAL
OUTDOOR
• HOARDINGS
• POSTERS
• NEON LIGHTS
• FAIRS & EXHIBITIONS
• TRANSIT ADVERTISING
• BALLOONS
• LOUDSPEAKER ANNOUNCEMENTS
MEASUREMENT:

• DAR TEST-DAY AFTER RECALL


• TEST MARKET METHOD
SALES PROMOTION:-
DIRECT AND IMMEDIATE INDUCEMENT.
MARKETING NEEDS SERVED BY SALES
PROMOTION:-
• NEW PRODUCT INTRODUCTION
• UNLOADING ACCUMULATED INVENTORY
• GETTING NEW ACCOUNTS
• GETTING BACK LOST ACCOUNT
• PERSUADING DEALERS TO BUY MORE
TOOLS AND TECHNIQUES OF
SALES PROMOTION:-
• DEMONSTRATIONS
• TRADE FAIRS AND EXHIBITIONS
• COUPONS AND FREE SAMPLES
• CONTESTS
• MERCHANDISING /DISPLAY
• SALES PROMOTION ON INTERNET
STDP
STDP-SEGMENTING
TARGETING
DIFFERENTIATING
POSITIONING
SEGMENTATION

MASS MARKETING
The process in which the seller engages
in the mass production, mass
distribution, and mass promotion of
one product for all buyers.
SEGMENT MARKETING
Serving to a group of customers who
share a similar set of needs and wants.
Basis of identifying segments
1. Geographic Segmentation
2. Demographic Segmentation
3. Psychographic Segmentation
4. Behavioral Segmentation
GEOGRAPHIC SEGMENTATION
It calls for dividing the market into different
geographical units.
Geographic variables
• region of the world or country, East, West, South,
North, Central, coastal, hilly, etc.
• country size/country size : Metropolitan Cities, small
cities, towns.
• Urban, Semi-urban, Rural.
• climate Hot, Cold, Humid, Rainy.
DEMOGRAPHIC SEGMENTATION
Demographic variables
• age
• gender Male and Female
• family size
• family life cycle
• education Primary, High School, Secondary, College,
Universities.
• income
• occupation
• socioeconomic status
• religion
• nationality
• language
PSYCHOGRAPHIC SEGMENTATION
The buyers are divided into different
groups on the basis of lifestyle or
personality or values
Psychographic variables
• personality
• lifestyle
• value
• attitude
BEHAVIORAL SEGMENTATION

Behavioral variables
• benefit sought
• product usage rate
• User status
• brand loyalty
• readiness to buy stage
REQUIREMENTS OF A
SEGMENT
DAMAS
Differentiable
Actionable
Measurable
Accessible
Substantial
Effective Targeting Requires…

• Identify and profile distinct groups of


buyers who differ in their needs and
preferences.
• Select one or more market segments to
enter.
• Establish and communicate the distinctive
benefits of the market offering.
PATTERNS OF SELECTING THE
TARGET MARKET
Single-segment concentration.
Selective specialization.
Product specialization.
Market Specialization.
Full market coverage.
DIFFERENTIATION
THE PROCESS OF ADDING A SET OF
MEANINGFUL AND VALUED
DIFFERENCES TO DISTINGUISH THE
COMPANY’S OFFERINGS FROM
COMPETITOR’S OFFERINGS
Differentiation Strategies
• Product
• Channel
• Image
• Price
Product Differentiation
• Product form • Style
• Features • Ordering ease
• Performance • Delivery
• Conformance • Customer training
• Durability • Maintenance
• Reliability
• Reparability
POSITIONING

Act of designing the company’s offering and


image to occupy a distinctive place in the
mind of the target market
CRITERIA FOR SUCCESSFUL
POSITIONING
1. CLARITY
2. CONSISTENCY
3. CREDIBILITY
4. COMPETITIVENESS
CORPORATE STRATEGY

1. STABILITY-THE FIRM STRIVES TO MAINTAIN ITS STATUS


QUO.

2. EXPANSION-THROUGH INTENSIFICATION,INTEGRATION
AND DIVERSIFICATION

3. DIVESTMENT- SELL OFF OR LIQUIDATE THE NON-


DESIROUS BUSINESS

4. COMBINATION- TWO OR THREE STRATEGY AT A TIME


Stability strategy
• Firm stays with the same businesss,same
market-product posture
• Does not involve redefinition of the of the
business of the corporation
• Does not warrant much of fresh
investment
• Risk is less
Conditions under which firms adopt this
strategy:
Cont…
• When the firm feels it enjoys a comfortable
position in its current business
• When the firm’s growth ambitions are modest
• When the industry concerned is mature and the
firm enjoys a profitable position
• This is often adopt this strategy after rapid
growth or diversifiation to consolidate its
position.
• Business that have just come through turmoil.
Expansion strategy
Conditions under which the strategy is adopted:
• Corporate ambitions are high
• When enormous new opportunities are coming
up in the environment.
• For fighting competition in the growing business.
• When the firm has strong resource base
• To counter the vulnerability of a single business
position or the position on the PLC.
Routes to expansion:
• Intensification
-firm tries to grow in the related areas.
best described by Ansoff product-market grid
• Integration
forward
backward
horizontal
Cont….
• Diversification

 Concentric— R.P. D.C.


 Horizontal— D.P. S.C.
 Conglomerate—D.P. D.C.
Divestment strategy
Conditions under which the strategy is adopted:
• When the firm finds that some of its businesses
have become unattractive, unprofitable and
unviable
• Obsolesence
• Firms unable to compete in the competitive
market
• When the business is in the decline stage of
PLC.
Generic Strategies

Low-cost
leadership

Differentiation Focus
PORTER’S GENERIC STRATEGIES

Competitive
Advantage
Lower Cost Differentiation

Broad 1. Cost 2. Differentiation


Target Leadership
Competitive Scope
3 A. Cost Focus 3 B. Differentiation
Narrow Focus
Target
Cost leadership- achieving leadership in the
industry by providing the product at the most
reasonable cost.
Differentiation:
Basis of differentiation-
• Product itself
• Delivery system
• Credit facilities
• Service factor
REQUIREMENTS FOR GENERIC COMPETITIVE
STRATEGIES

Generic Commodity Required


Strategy Skills and Resources
Overall cost • Sustained capital investment and access to capital

leadership
• Process engineering skills

• Intense supervision of labour


• Products designed for ease
in manufacture
• Low-cost distribution system
Differentiation • Strong marketing abilities
•Product engineering
• Creative flare
REQUIREMENTS FOR GENERIC COMPETITIVE
STRATEGIES
CONTD…

• Strong capability in basic research

• Corporate reputation for quality or technological

leadership

• Strong cooperation from channel


Focus
• Combination of the above policies directed at the

particular strategic target


Risks associated with each of the
generic strategies
Cost leadership:
• Competitor’s imitation
• Technological changes
• Threat of differentiation
• Inability to see changes in the market due
to over attention paid to cost
• inflation
Cont…
Differentiation :
• Competitor’s imitations
• Change in customer’s needs
Focus:
• Competitors find submarket within the
target.
• The segment becomes unprofitable.